Wallets

KNOWwallets

Like in real life, your wallet must be secured. Bitcoin makes it possible to transfer value anywhere in a very easy way and it allows you to be in control of your money. Such great features also come with great security concerns. At the same time, Bitcoin can provide very high levels of security if used correctly. Always remember that it is your responsibility to adopt good practices in order to protect your money.

Think of a wallet like an email address. You can have one or you can have several. You can have an email hosted by a website (yahoo, gmail, hotmail) or you can have an email on your personal computer (Outlook). A Bitcoin wallet creates an address. A Bitcoin address is a unique identifier which allows you to receive Bitcoins. With PayPal you send funds to an email address, and similarly with Bitcoin you send funds to a Bitcoin address. For example, this is a Bitcoin addresses: 1GUoNEJFpsfkrfb2v8UkuL9HpEHgUEK8RX

Furthermore, every Bitcoin address has a corresponding private key. A private key is a secret code which allows the user to prove his ownership of his Bitcoins. Every Bitcoin address has a matching private key, which is saved in the wallet file of the person who owns the balance. The private key is mathematically related to the Bitcoin address, and is designed so that the Bitcoin address can be calculated from the private key, but importantly, the same cannot be done in reverse.

Small amounts for everyday uses

A Bitcoin wallet is like a wallet with cash. You wouldn’t keep a thousand dollars in your pocket, you might want to have the same consideration for your Bitcoin wallet. In general, it is a good practice to keep only small amounts of Bitcoins on your computer or mobile for everyday uses and to keep the remaining part of your funds in a safer environment. You can store large amounts on a paper wallet (cold storage). Then you can keep the paper wallet in a safe place like a home safe.

There are multiple wallet services

There are wallet services that you can download to your computer, which are also known as a client. Using the email analogy, think outlook. You also have the choice to use a web service for your wallet. This means your wallet is hosted by a website online, known as a web wallet. Using the email analogy again, think yahoo, gmail, hotmail. Most web wallets have apps for your smart phone. It’s ideal to have both, a wallet on you PC and a wallet online. Most websites where you can buy and sell Bitcoins have their own wallet built in. For example, if you sign up for localbitcoins.com or coinbase, you’ll be automatically assigned a wallet. The different Bitcoin exchanges will have wallets as well, Coinbase, Bitstamp, BTC-e, etc. There’s also a way to make a paper wallet. More information on paper wallets bellow.

Software services (a downloadable client for your PC or Mac)

MultiBit is a secure, lightweight, international Bitcoin wallet for Windows, MacOS and LinuxMultiBit makes performing Bitcoin transactions quick and simple
MultiBit comes in a variety of languages because Bitcoin is without borders
MultiBit is free to download and is open source (MIT license)
MultiBit is easy to install

Designed from the ground up to provide the highest level of security for heavily-invested Bitcoin users, while still maintaining a high degree of usability and convenience. Its ease of use and advanced features make it one of the most popular alternative Bitcoin clients, and is featured on the main Bitcoin website.

Eletrum Electrum is an easy to use Bitcoin client. It protects you from losing coins in a backup mistake or computer failure, because your wallet can be recovered from a secret phrase that you can write on paper or learn by heart. There is no waiting time when you start the client, because it does not download the Bitcoin blockchain.

Instant on, no down time, safe, forgiving, ambiguous, cold strorage, and more great features.

Online Web Services

BlockChain My Wallet is a free online bitcoin wallet which you can use to make worldwide payments for free. We make paying with bitcoins easy and secure available anywhere on your phone or desktop.

We are not a bank, you retain complete ownership of your Money. We cannot view your balance, see your transactions or make payments on your behalf.

Circle: Money, moving forward. Circle is on a mission to change the global economy. How? By moving money over the open internet, like the way we share music, texts, photos and information now.

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Coinbase is a website where you can buy and sell bitcoin. Once you signup for the website, you’ll get a bitcoin wallet. Coinbase is one of the most trusted bitcoin websites. Visit their website for more information.

Be careful with online web services

Online wallets and exchanges look like online banks. However, you should always choose such services carefully. As of today, these services generally don’t provide enough insurance and security to be used to store your money like a bank. Using security features like two-factor authentication can help to increase the security of your accounts. If the website hosting your wallet disappears, so can your bitcoins.

Hardware wallet

A hardware wallet is a special type of bitcoin wallet which stores the user’s private keys in a secure hardware device.

They have major advantages over standard software wallets:

private keys are often stored in a protected area of a microcontroller, and cannot be transferred out of the device in plaintext

immune to computer viruses that steal from software wallets

can be used securely and interactively, as opposed to a paper wallet which must be imported to software at some point

much of the time, the software is open source, allowing a user to validate the entire operation of the device

TREZOR is a secure bitcoin storage and a transaction signing tool. The private keys are generated by the device and never leave it thus they cannot be accessed by a malware.

It uses a deterministic wallet structure which means it can hold an unlimited number of keys (BIP 0032/BIP 0044). A recovery seed is generated when the device is initialized. In case TREZOR gets lost or stolen, all its contents can be recovered using this seed (private keys, bitcoin balance and transaction history) into a new device or another BIP 0039/BIP 0044 compatible wallet.

TREZOR also introduced a unique way of PIN entering preventing keyloggers from recording it even when entered on a compromised computer. An encryption passphrase can be set on top of the PIN protection. More passphrases can be used for plausible deniability.

Ledger Nano protects your Bitcoin data within a smartcard. Its micro-processor certified against all types of attacks (both physical and logical), and has been used in the banking industry for decades (think credit card chips). The device connects to your computer through the USB port and will do all the Bitcoin cryptographic heavy lifting such as signing transactions inside its secure environment. You can therefore use your Bitcoin account with maximum trust, even on an insecure or compromised computer.

The second factor verification of the transaction signature can be done either with a paired smartphone (Android, iOS) or a physical security card.

The Ledger Wallet Chrome application (available also on Chromium) provides an easy onboarding as well as a seamless user experience, and the Nano is compatible with numerous third party software: Electrum, Mycelium, GreenAddress, Greenbits, Coinkite and Copay.

Paper wallet

A paper wallet is a way to store Bitcoins that involves printing the Bitcoin addresses and private keys directly on a piece of paper. When done properly, paper wallets are one of the safest ways possible to store Bitcoins.

For long-term storage of bitcoins (or giving BTC as gifts) it can be risky to store your bitcoins in an exchange or online wallet. These types of sites have the possibility of getting hacked. Even keeping a live wallet on your own computer can be risky.

By printing out your own tamper-resistant bitcoin wallets and generating your own addresses, you can minimize your exposure to hackers as well as untrustworthy people in your home or office. Just transfer your bitcoins into your new wallets, and use common sense to keep your wallets safe the way you would jewels and ordinary cash. Or give them away!

How to video

Backup your wallet

Stored in a safe place, a backup of your wallet can protect you against computer failures and many human mistakes. It can also allow you to recover your wallet after your mobile or computer was stolen if you keep your wallet encrypted.

Backup your entire wallet

Some wallets use many hidden private keys internally. If you only have a backup of the private keys for your visible Bitcoin addresses, you might not be able to recover a great part of your funds with your backup.

Encrypt online backups

Any backup that is stored online is highly vulnerable to theft. Even a computer that is connected to the Internet is vulnerable to malicious software. As such, encrypting any backup that is exposed to the network is a good security practice.

Use many secure locations

Single points of failure are bad for security. If your backup is not dependent of a single location, it is less likely that any bad event will prevent you to recover your wallet. You might also want to consider using different medias like USB keys, papers and CDs.

Make regular backups

You need to backup your wallet on a regular basis to make sure that all recent Bitcoin change addresses and all new Bitcoin addresses you created are included in your backup. However, all applications will be soon using wallets that only need to be backed up once.

Encrypt your wallet

Encrypting your wallet or your smartphone allows you to set a password for anyone trying to withdraw any funds. This helps protect against thieves, though it cannot protect against keylogging hardware or software.

Never forget your password

You should make sure you never forget the password or your funds will be permanently lost. Unlike your bank, there are very limited password recovery options with Bitcoin. In fact, you should be able to remember your password even after many years without using it. In doubt, you might want to keep a paper copy of your password in a safe place like a vault.

Use a strong password

Any password that contains only letters or recognizable words can be considered very weak and easy to break. A strong password must contain letters, numbers, punctuation marks and must be at least 16 characters long. The most secure passwords are those generated by programs designed specifically for that purpose. Strong passwords are usually harder to remember, so you should take care in memorising it.

Offline wallet for savings

An offline wallet, also known as cold storage, provides the highest level of security for savings. It involves storing a wallet in a secured place that is not connected to the network. When done properly, it can offer a very good protection against computer vulnerabilities. Using an offline wallet in conjunction with backups and encryption is also a good practice. Here is an overview of some approaches.

Keep your software up to date

Using the latest version of your Bitcoin software allows you to receive important stability and security fixes. Updates can prevent problems of various severity, include new useful features and help keep your wallet safe. Installing updates for all other software on your computer or mobile is also important to keep your wallet environment safer.

Multi-signature to protect against theft

Bitcoin includes a multi-signature feature that allows a transaction to require the signature of more than one private key to be spent. It is currently only usable for technical users but a greater availability for this feature can be expected in the future. Multi-signature can, for example, allow an organization to give access to its treasury to its members while only allowing a withdrawal if 3 of 5 members sign the transaction. It can also allow future online wallets to share a multi-signature address with their users, so that a thief would need to compromise both your computer and the online wallet servers in order to steal your funds.

Have a plan for the long-term

Your bitcoins can be lost forever if you don’t have a backup plan for your peers and family. If the location of your wallets or your passwords are not known by anyone when you are gone, there is no hope that your funds will ever be recovered. Taking a bit of time on these matters can make a huge difference.